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Sunday, 17 June 2012

Fool Brittania - Deuxième Partie

Monetary Easing
'Rob from the People to give to the Banks' 
Russian Today reports
"The Bank of England and the UK Treasury have revealed plans for a £100 billion support program in order to stimulate British banking to provide cheaper loans during the time of recession. 
British Chancellor George Osborne explained the emergency plan, called “funding for lending” scheme, requires the Bank of England to provide cut rate lending to banks in order for them to pass on the lower interest rates to customers.
Osborne pointed out the scheme was developed in order to avoid a possible credit crunch and higher interest rates in Britain, as the banks are reluctant to lend at the time of economic uncertainty. The plan could secure an £80bln in loans to businesses and households within weeks, according to the Chancellor. 
He also warned that British economy should rely on tight fiscal policy and active monetary policy in supporting its economy, while “things could get worse before they get better” in the eurozone with a probable Greek exit.
Meanwhile the Bank of England Governor Sir Mervyn King raised hopes on a new round of quantitative easing, saying that “the case for a further monetary easing is growing”. On Friday the Bank of England starts pouring £5bln a month into British banking to boost its liquidity."
 There is something of a lie hidden within this article, firstly where exactly is this £100 billion coming from? Is it from some previously unexplored vault beneath Westminister? A kind philanthropist who took pity on the poor nation of Britain? A white knight riding to Cameron's rescue?

I suspect it is from the printing press... Just a few weeks ago their Bosses in the White House were saying that England will need to put money into the "system" to simulate growth and naturally the servant has obeyed it's master.

This is 'monetary easing'. Why then does the Bank of England Governor proceed to state that  “the case for a further monetary easing is growing” whilst the Chancellor states that monetary easing will continue at a rate of £5 billion per month for the next twenty months? Confused, you will be.

                       Apr     Mar     Feb     Jan     Dec     Nov     Oct
Country               2012    2012*   2012*   2012*   2011*   2011    2011
                     ------  ------  ------  ------  ------  ------  ------

China, Mainland      1145.5  1144.0  1155.2  1166.2  1151.9  1254.5  1256.0
Japan                1066.1  1076.3  1085.4  1082.8  1058.0  1066.8  1006.9   
United Kingdom        154.2   121.9   116.1   114.1   111.7   124.9   106.8

The above chart courtesy of the US Treasury shows that whilst China has cut it's holding of US treasuries by some $100 billion, the slack has been taken up by Japan and the United Kingdom. Of course the US has issued a total of $250 billion of new debt in this period.

If the total assets in the world can be expressed as having a value equal to the total supply of money in the world and the total supply of money in the world increases by 10% then the value of the world's total assets when expressed in monetary terms increases by 10%, but clearly the actual value of assets never changes and the value of money decreases.

This is inflation. It is happening before your very eyes, the government is not hiding it but proclaiming it.

What does it mean for you?

The value of your salary, savings and pensions is decreasing. Every time your house does not go up 10% in value, you are losing some of your wealth.

The UK government has decided that it is more important that the banks do not have to recognise their bankruptcy than you be allowed to retain whatever value you currently hold. The banks appreciate your sacrifice!